Value Investing Strategies of Warren Buffett and Benjamin Graham

Archive for August, 2007

Michael Kinsley has said about Washington: “The scandal isn’t in what’s done that’s illegal but rather in what’s legal.”

Many CEOs have no hesistation about manipulating earnings to meet the desires of Wall Street.

Their first assumption is that their job is to encourage the highest stock price possible, something which Warren Buffett disagrees. To get a high price, operational excellence is required failing which they will resort to accounting gimmicks.

Borsheim’s normally is closed on Sunday but will be open for shareholders from 10am to 6am on May 2nd. On annual meeting last year, the store did an incredible amount of business. Sales were double those of the previous year, and the store’s volume on Sunday greatly exceeded volume for any day in Borsheim’s history. Charlie attributes this record to the fact that he autographed sales tickets that day and, while I have my doubts about this proposition, we are not about to mess with a winning formula. Please give him writer’s cramp. On last year’s Sunday, Borsheim’s wrote 2501 tickets during the eight hours it was open. For those of you who are mathematically challenged, that is one ticket every 11.5 seconds.

In an earlier interview with CNBC, Warren Buffett mentioned that the current crisis offers fine buying opportunities. Rumours have been flying that Warren Buffett is currently buying shares in distressed mortgage lenders, one of them Countrywide.

The Omaha Golden Spikes will meet the Iowa Cubs on Saturday evening, May 1st, at Rosenblatt Stadium. Your Chairman, whose breaking ball had the crowd buzzing last year, will again take the mould. This year I plan to introduce my “flutterball”. It’s a real source of irritation to me that many view our annual meeting as a financial event rather than the sports classic I consider it to be. Once the world sees my flutterball, that misconception will be erased.

Bridge players can look forward to a thrill on Sunday, when Bob Hamman – the best the game has ever seen – will turn up to play with our shareholders in the mall outside of Borsheim. Bob plays without sorting his cards – hey, maybe that’s what’s wrong with my game.

On December 21 1998, Berkshire completed the $22 billion acquisition of General Re Corp. This ownership will allow General Re to operate in whatever manner that will maximise its value without worrying about market perception.

For instance, a publicly held reinsurer by the very nature of its role, has very volatile earnings. This volatility can hurt it’s credit ratings and p/e ratios. As a result, an reinsurer might sometimes do things to smoothen the earnings that is actually costly to its core business.

Charlie and I have the easy jobs at Berkshire: We do very little except allocate capital. And, even then, we are not all that energetic. We have one excuse, though: In allocating capital, activity does not correlate with achievement. Indeed, in the fields of investments and acquisitions, frenetic behavior is often counterproductive. Therefore, Charlie and I mainly just wait for the phone to ring.